Small and medium sized businesses are continuing to rely on their cash reserves to see them safely through the recession and finance their future growth, according to research carried out by British challenger bank Aldermore.
The study, conducted amongst 300 SME firms throughout the country, confirms that nearly two fifths (38 per cent) of SMEs are depending on cash reserves to fund their future growth ambitions. Of the remainder, 12 per cent say they will turn to a bank loan, 9 per cent to an overdraft, 10 per cent will use leasing or hire purchase, whilst 7 per cent will use factoring and invoice discounting, with 4 per cent citing funding by a commercial mortgage. Eight per cent of business owners say they will fund their future growth using their own cash and 10 per cent say they were not planning to finance future growth at the moment.
Damon Walford, Managing Director of Aldermore Invoice Finance, said: “Given the continuing reluctance of big banks to lend to small businesses, it’s understandable that business owners have been forced to rely on their cash reserves to fund their future growth. But as cash reserves become depleted, so business owners will need to consider alternative forms of funding, such as invoice finance and asset finance.”
Aldermore’s findings are supported by data released recently by International Trade Monitor, which says that a lack of confidence has led more than a fifth of all SMEs to consider alternative sources of funding. It says the top three sources are asset based finance (44 per cent), factoring (31 per cent) and personal savings (26 per cent).
Walford concludes: “Although SMEs have relied heavily on bank loans and overdrafts in the past, many business owners have realised the vulnerability of having all their eggs in one basket and are now considering diversifying their funding sources. SMEs have more choice than they may realise; it’s worth consulting an accountant or commercial finance adviser to discover just what’s available.”
Established in 2009, Aldermore has lent more than £1 billion to 12,000 SME customers throughout the UK and has increased its client base by 52 per cent in the past year whilst many other banks have been scaling back their SME loan books. Aldermore can help SMEs requiring funding of up to £10 million with a range of competitive finance facilities which are supported by a reliable, high quality service.
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